Rising Inflation Expectations in the UK: A Future Challenge for the BoE
A survey by Citi and YouGov reveals a rise in longer-term inflation expectations among the British public, reaching 4.1% in September. This increase may influence the Bank of England's cautious approach to interest rate reductions as it grapples with ongoing inflation pressures and aims to achieve its 2% target.
Long-term inflation expectations in the UK have risen this month, per a survey by Citi and YouGov. The poll indicates that public anticipations of inflation over the next five to ten years increased to 4.1% in September from 3.9% in August.
This trend, observed against a backdrop of unchanged short-term inflation expectations, underscores why the Bank of England remains cautious in reducing interest rates. Currently, the BoE's Bank Rate stands at 4%, and there's a suggestion it might slow its pace of borrowing cost reductions to counter persistent inflation pressures.
Despite the rise, the UK's inflation rate at 3.8% in August was the highest among the Group of Seven, with the BoE forecasting a potential peak at 4% in September. The challenge remains to bring it down to its 2% target by spring 2027.
(With inputs from agencies.)
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- Citi
- YouGov
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